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On Wednesday, Deutsche Bank (ETR:DBKGn) analysts made a decisive move by downgrading BT Group Plc. (LON:BT/A:LN) (NYSE: BT) stock from Hold to Sell. The new price target set for the company’s shares is GBP1.40. Currently trading at $1.80, near its 52-week high of $1.79, BT Group’s stock has seen a notable year-to-date increase of 19%, outperforming the SXKP index, which rose by 14% in the same period. According to InvestingPro, the stock appears fairly valued based on its proprietary Fair Value model.
The analysts noted that BT shares have been more defensive compared to peers amidst trade war uncertainties, a sluggish economy, and the strengthening of the British Pound. This resilience is observed even as BT’s infrastructure arm, Openreach, experienced line losses. The buying activity from Bharti Televentures has been a positive influence on the stock, counteracting the impact of weaker key performance indicators (KPIs) and previous broker downgrades. InvestingPro data shows the company maintains a GOOD Financial Health Score of 2.9, with an attractive dividend yield of 7.01% and a modest P/E ratio of 7.05.
Despite the potential for reduced capital expenditures post-fibre rollout and a possible deal regarding BT’s Global Services, Deutsche Bank analysts expressed concerns over the limited scope for market recovery. They anticipate that competition in the market is likely to intensify rather than diminish. Additionally, factors such as the UK 10-year government bond yields and the cessation of trade buying are expected to weigh on the stock.
The analysts emphasized that the current share price is now 20% above their target price, which led to their decision to downgrade the stock to Sell. The report reflects a cautious stance on BT Group’s future stock performance, considering the array of challenges and market dynamics highlighted by Deutsche Bank.
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